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Instant Insights / October is National Cybersecurity Awareness Month

The COVID-19 pandemic has revealed new cyber threats. Now's the time for insurance professionals and insureds to reexamine cybersecurity strategies and coverage.

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Enforcement actions related to information security represent more than 70% of the fines issued by EU Data Protection Authorities under GDPR as of June 2020. (Credit: wk1003mike/Shutterstock) Enforcement actions related to information security represent more than 70% of the fines issued by EU Data Protection Authorities under GDPR as of June 2020. (Credit: wk1003mike/Shutterstock)

Corporate acquisitions are like poker games — players have only limited opportunities to improve their hands before the betting ends. When one company acquires another, whether in a friendly deal, the sale of stock or assets in a Chapter 11 bankruptcy, or a hostile takeover, the result is the same: the acquirer bets on the privacy and security practices of the acquired entity.

It not only assumes responsibility for protecting acquired personal information but also liability for any pre-acquisition security breaches. Assessing risks is difficult because often, the acquiring company has little opportunity to evaluate the cards it does not see.  It lacks visibility into the target’s cybersecurity protocols and practices. In a friendly transaction, the target will be reluctant to allow any “outsider” to examine its sensitive security secrets; in Chapter 11, time pressures may limit any opportunity for scrutiny; and in a hostile takeover, the acquirer will not have any chance to examine these matters.

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